Spend Your Money Wisely When It Comes to New Business Ventures

You won’t see a good return on every new business investment. Learn from these mistakes.

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Operating a successful business requires astute money management. Yet all business leaders can pinpoint a time in their career when they threw money away on a venture that didn’t go as planned. When you don’t earn the anticipated return on your investment, the most important thing is to learn from that experience.

Brian Smith, owner of X Rooter Sewer & Drain Cleaning in Rhinelander, Wisconsin, says his biggest money waster was his company’s venture into septic pumping. About 15 years ago, Smith bought a septic truck and a 100-acre farm to spread waste, and the company started pumping septic tanks.

Things didn’t go as planned. X Rooter was losing money, in part because another company was lowballing and keeping rates down. He wasn’t able to devote more time to the septic service, so he sold off the business after a year. The company experienced about $100,000 in losses.

Smith learned a valuable lesson from the company’s short-lived expansion into septic pumping: Focus on what makes you money. For X Rooter, the focus is sewer cleaning, drain cleaning and video inspections. 

“Septic pumping wasn’t a good fit for the company,” Smith says. “It was stretching me too thin.”

While X Rooter no longer pumps septic tanks, the company remains closely associated with the septic service industry.

“I work with septic pumpers, and they give me business and I give them business. It’s a win-win situation,” Smith says. “They can focus on where they make money, and I focus on where I make money.”

Advertising woes

Sinking money into ineffective marketing can be a big money waster, says Hugh McLaughlin, owner of 88 Drain in Tucson, Arizona. McLaughlin says hard solicitations like billboards, direct mail flyers, phone book ads and taxi roof signs are no longer worth the money.

“Now, everybody goes to the internet or their phone,” McLaughlin says.

Yet digital marketing can be just as big of a money waster as print ads, he says. 88 Drain determined it was wasting money on pay-per-click ads that cost $5 to $7 per click, whether or not the click resulted in a sale. The company also pulled out of online referral services, like Angie’s List and HomeAdvisor, because it was competing against other aggressive contractors for the same leads.  

Instead, 88 Drain uses its website as the hub for digital marketing by regularly updating the site with customer reviews and monthly specials. Without spending money on advertising, 88 Drain is ranking well organically on search engines.

“Our marketing dollars have gone to almost nothing. We focus on having our guys encourage clients to go to the website and leave a review,” McLaughlin says.

Ben Smith, owner of Marvel Sewer and Drain in the Minneapolis area, also identified advertising as a big money waster. He says one-time ads in school calendars, sports schedules or “Best of” pages don’t provide a good return on his investment.

“Specifically, the ads that are $200 to $300 have never done anything for me, and I hardcore track everything,” Smith says. He says $295 is the “I gotcha price — the price that someone will most likely say, ‘OK. You know, that might work. Here’s some money.’”

Seeing results

Instead of wasting money on flash-in-the-pan promotions, Marvel Sewer and Drain partners with a marketing firm for comprehensive, ongoing campaigns. The company also gives away its trendy superhero-theme branded coffee mugs, shirts, caps and can covers. Marvel Sewer and Drain spends more in the long run for its ongoing marketing strategies, but it also experiences better results.

One thing that doesn’t cost a penny is the company’s commitment to customer satisfaction. By focusing on service, Marvel Sewer and Drain does little things to please customers, like arriving on time, being courteous and cleaning up after themselves.

“Building that customer rapport is what’s really driven my business since day one,” Smith says.

Likewise, satisfied customers are key to success for LH Plumbing Services in Fairfield, Ohio.

“My best marketing strategy is word-of-mouth and referrals,” says Linda Hudek, owner of LH Plumbing Services. “Any money I’ve put into marketing in the past has been fruitless.”

Despite not investing in advertising, Hudek has more work than she can handle — but this wasn’t always the case. When she started her business in 2010, Hudek was looking for commercial plumbing jobs in the area. To access business leads, blueprints and invitations to bid, she subscribed to an online resource. Looking back, Hudek says she should’ve saved the money on the annual subscription. Over time, she found inexpensive ways to find leads, like talking to the contractors she knew.

Another unnecessary expense for Hudek is the finance fee she pays on loans. Hudek has had second thoughts after taking out business loans to purchase equipment.

“I wish I would’ve paid cash. I’m still stuck with the payment months later,” she says. She’s learned that it’s better to pay cash for certain purchases — just wait until you can afford them.

Learn from others

A big money waster for Russell Joe Jr., owner of Quality Sewer & Drain Cleaning, has been direct mail marketing. He’s spent $500 to $1,000 on several different campaigns but hasn’t gotten a sales lead. The company even specifically targeted neighborhoods where it did a lot of work.

“For every job, we find out how they heard of us,” Joe says. He has yet to pick up a job from the mailers in his service area of North Shore and Cape Ann, Massachusetts. He’s also tried Angie’s List and HomeAdvisor, but he says he’s too busy to be glued to his computer, watching for and responding to leads.

“If you’re just starting out, it might be good to get your foot in the door, but once you’re established and you’re busy, it’s too hard to respond within minutes,” he says.

Before he spends a bunch of money on something, Joe consults with a couple of the friends he’s made at trade shows or through social media. All of them own businesses, and some of them do sewer maintenance and rehab, like Joe. They give and receive advice in a group message or phone call.

“We’ve become good friends and share ideas that way,” he says.

All pumping or cleaning contractors probably have similar money-wasting stories to tell. But don’t feel too bad about a few dollars going down the drain in an effort to build the business. Sometimes entrepreneurial spending pays off, and sometimes it doesn’t. Remember the credo — “Nothing ventured, nothing gained.”



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